KEYFIELD's 9MFY24 results were deemed within our expectations as we are expecting a seasonally weaker quarter in 4QFY24 due to the monsoon season. Its core profit surged YoY and QoQ, lifted by improvement in daily charter rates (DCR) and vessel utilisation on the vibrancy in the local OSV market. Trading at FY25F PER of 7.8x (compared to 10x average for the industry) after the recent weakness in share price, we believe the stock appears to be attractive at this juncture. We maintain our forecasts, TP of RM3.18 and OUTPERFORM call.

KEYFIELD's 9MFY24 core profit of RM181.5m met our expectations, achieving 95% of our full-year forecast. We anticipate a seasonally weaker 4QFY24 due to the monsoon season and the planned dry docking of four vessels in December 2024. The company declared a third interim dividend of RM0.04 per share, representing a 41% payout ratio, exceeding our earlier assumption of 20%.

YoY, KEYFIELD's 9MFY24 revenue surged by 68% YoY, driven by increased vessel utilisation, additional charter days from new vessels, and higher DCR. Core profit more than quadrupled, benefiting from a significantly lower increase in operating costs relative to charter rates.

Additionally, core profit rose by 118% YoY, supported by slower cost of sales growth and a substantial decline in finance costs following the reduction of borrowings.

QoQ, revenue grew by 9%, reflecting higher DCRs for new charters and improved vessel utilisation rates (99.2% vs. 96.2% in the preceding quarter). This contributed to a 16% surge in core profit, underscoring the company's operational efficiency and improved profitability.

Outlook. We expect weaker numbers in 4QFY24 due to the incoming monsoon season where its four-point mooring accommodation work boats will not be able to operate at high utilisations. That aside, four of its vessels will go into dry docking from Dec 2024 to February 2025, preparing them for more work starting 2QFY25. The majority of its accommodation work boats (AWB) are currently engaged in medium-term charters of six to nine months. Should demand for AWBs remain robust, we project that the group could secure higher DCR for FY25 by the end of FY24.

Forecasts. Maintained.

Valuations. We maintain our TP of RM3.18 pegged to unchanged 11x FY25F PER, which is at a slight premium to 10.2x median OSV multiple due to its younger fleet and higher fleet specifications.

Investment case. We like KEYFIELD due to: (i) its exposure to the booming local OSV industry, (ii) its relatively young fleet age of eight years and DP2-rated vessels which are preferred by clients, and (iii) its inclusion as an AHTS panel contractor for Petronas which could open doors for more AHTS charters. Maintain OUTPERFORM.

Risks to our call include: (i) significant decline in Brent crude prices, (ii) unexpected vessel downtime due to unplanned maintenance, and (iii) decline in oil producers' capex planned.

Results Higlights 3Q 2Q Q-o-Q 3Q Y-o-Y 9M 9M Y-o-Y FY24 FY24 FY23 FY24 FY23 FYE : Dec (RM m) Revenue 216.8 199.0 9.0% 149.0 45.5% 522.2 310.9 67.9% Cost of sales -98.6 -90.3 9.2% -74.9 31.6% -244.2 -167.5 45.7% Gross profit 118.2 108.7 8.7% 74.0 59.6% 278.0 143.4 93.9% Other income 0.6 0.7 -16.4% 0.1 392.2% 1.7 1.2 48.7% Operating Cost -10.9 -9.3 17.8% -5.2 109.3% -25.9 -13.8 87.1% Other expenses -1.2 -3.2 -63.1% -2.1 -41.8% -5.6 -5.5 1.0% Operating profit 106.7 96.9 10.1% 66.9 59.5% 248.2 125.2 98.3% Finance costs -0.5 -1.5 -69.9% -4.2 -89.0% -4.9 -10.7 -54.2% Profit/(loss) before tax 106.2 95.3 11.4% 62.7 69.5% 243.3 114.4 112.6% Taxation -24.9 -25.1 -0.7% -16.5 51.5% -61.2 -30.2 102.6% Non-controlling interest 0.1 0.2 -33.2% 0.4 -69.4% -0.8 -0.9 -11.0% Net profit 81.1 70.0 15.8% 45.8 77.2% 182.1 84.2 116.2% EI 0.0 0.0 0.0 0.6 1.1 0%

Source: Kenanga Research - 15 Nov 2024